Index funds

Pioneering through more than three decades of meeting client needs with index strategies

LGIM’s approach to index investment

We believe that three pillars of our indexing business will help us remain a trusted partner to those seeking to use index strategies in their portfolios:

Our scale

With £507 billion* of index assets under management (AUM) and the product breadth across more than 400 index portfolios that aims to meet any client’s needs, we use our size both to glean insights to improve client outcomes and to generate efficiencies that we can pass on to your clients.

Our responsibility

As well as helping our clients reflect their environmental, social, and governance (ESG) views in index strategies, we use our scale as one of the world’s largest shareholders to raise standards across the entire market.

Our expertise

Having run index funds for more than three decades we have developed resources, methodologies, and technologies to manage indices more efficiently. These include a dedicated index research and strategy function. We pass all the benefits – the cost savings and the added value – along to your clients.

Each of these pillars supports one purpose: providing your clients with everything they are entitled to as asset owners, not just an index’s returns.

Introducing ETFs

ETFs

At L&G ETF, we offer solutions that seek to capture the opportunities, and mitigate the risks, of the rapidly shifting environment through the convenience, transparency and liquidity of the ETF structure.

Pragmatic replication

At LGIM, we have developed our own philosophy on the management of index strategies that we call ‘pragmatic replication’, an approach that is focused on delivering the best value for our investors. The overarching objective is to track the benchmark index as tightly as possible, using our in-house expertise, resources and technology to undertake comprehensive research aimed at enhancing investor returns when managing index changes.

Through such techniques, we believe we can reduce turnover and costs when trading and seek to maximise returns by exploiting any short-term mispricing or inefficiencies.

How do we embed responsibility and ESG in our index strategies?

Clients trust us to manage, safeguard and grow the value of their assets. We take this responsibility seriously, and we manage our index strategies responsibly. As part of this commitment, we integrate rigorous ESG criteria into our index strategies where our clients give us the mandate to do so. Fundamentally, we believe that companies that appropriately manage their ESG profile generally deliver better investment value over the long term.

We seek to meet these obligations in our index funds through the combination of three approaches:

Through company engagement: as a major global investor, we can have meaningful dialogue with corporate boards and executives on matters that impact long-term financial returns. We take a truly long-term view and use our scale to influence decisions.

Through a broader corporate governance lens: we address emerging issues, escalate concerns, and collaborate with other stakeholders, regulators and policymakers.

Through ESG integration: we can use our proprietary scoring tool to deliver meaningful improvements in our index strategies’ ESG profiles. Our ‘tilting’ approach allocates more capital to companies with higher ESG scores and less to companies with poor ESG scores, which we believe provides a compelling blend of impact, transparency, and market exposure.

Whilst LGIM has integrated Environmental, Social, and Governance (ESG) considerations into its investment decision-making and stewardship practices, this does not guarantee the achievement of responsible investing goals within funds that do not include specific ESG goals within their objectives.

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*Source: LGIM internal data as at 30 June 2024. Includes assets from associates and is based on managed AUM, including £1.5bn from multi-asset strategies.

Key risks

The value of any investment and any income taken from it is not guaranteed and can go down as well as up, and investors may get back less than the amount originally invested. The risks associated with each fund or investment strategy should be read and understood before making any investment decisions. Further information on the risks of investing is available from LGIM’s Fund Centres.

While LGIM has integrated Environmental, Social, and Governance (ESG) considerations into its investment decision-making and stewardship practices, this does not guarantee the achievement of responsible investing goals within funds that do not include specific ESG goals within their objectives.